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Applied Materials (AMAT) has rebounded to trade near unchanged today after reporting its Q4 (Oct) results last night. The company beat expectations on the top and bottom line, which has been a typical outcome for AMAT in recent quarters. That said, EPS fell 6% yr/yr while revenue declined 3.5% to $6.8 bln. The EPS drop marks the company's first yr/yr decline since the JulQ '23, while the revenue contraction is its first in seven quarters, reflecting softer demand out of China and slightly higher operating expenses. The midpoint of its Q1 guidance, $2.18 EPS on $6.85 bln in revenue, also implies further yr/yr declines.

• Despite tempered growth, AMAT noted positive leading indicators across leading-edge foundry/logic, DRAM, and HBM, which remain the fastest-growing areas of the semi cap market and align well with its strongest positions.
• Management also highlighted that NAND spending is on track to roughly double in CY25, an area where AMAT has historically held lower share.
• The weakness came from China, which fell to 29% of revenue, well below the 45% peak in Q1 FY24, reflecting expanded export restrictions and softer demand in ICAPS-related markets. It did see a notable uptick in Taiwan, with total revenue from the region increasing 42% yr/yr to about 27% of total revenue.
• Semiconductor Systems revenue declined 8% yr/yr to $4.76 bln, ahead of expectations for roughly a 9% drop. The mix was led by foundry and logic at 65%, followed by DRAM at 29%, though operating margin compressed to 32.1% from 35.2%.
• Management noted improved customer visibility, with some now planning one to two years ahead. Still, they expect a flattish first half of CY26, with the meaningful uplift arriving in 2H26 as leading-edge logic, DRAM, and HBM ramps tied to AI data-center demand begin to accelerate, with AI reaching a "tipping point" that is driving broader investment in computing infrastructure.

Briefing.com Analyst Insight

AMAT delivered Q4 results ahead of expectations, though the yr/yr declines in revenue and EPS, driven largely by softness in China, are keeping pressure on sentiment. The in-line Q1 outlook marks a step up from the downside guidance issued last quarter and suggests some sequential reacceleration, even if results are still expected to fall yr/yr. It's at least encouraging that AMAT didn't return with an even weaker update this time. Still, China/ICAPS digestion and margin pressure remain overhangs. Even so, the more constructive CY26 commentary and improved visibility represent a notable shift from last quarter's tone, reinforcing AMAT's longer-term positioning even as geopolitical headwinds weigh on the stock.